In today's highly competitive and complex corporate world, companies must balance time and money spent insuring reporting accuracy with the need to provide to investors, managers, or government overseers, quality and control information for their financial transaction. To accomplish this necessary quality and control, many companies perform intermittent verifications of selected records to ensure the substantial accuracy of the data presented on behalf of the company.
Based upon the entity's specific systems of accounting, risk factors are identified. The company randomly identifies a sample set of data records based upon the total population of data records. The data records are statistically analyzed to determine the attributes of the total population of the database, which can then be examined with regard to the risk factors. For example, a Real Estate entity or division of the Real Estate entity pulls a sample set of data records regarding specific notes receivable amounts. A selection of on-line or electronic terms for the sample notes receivable are recomputed and/or are computed through the term of the note, thus calculating the balance due on the note. The hard copy (paper copy) is then pulled and compared to the terms and calculated data. A comparison is performed to determine the accuracy and existence of the calculated sample data with regard to the actual hard copy files. Further, a sampling of notes receivable in default over a specified term frame can be analyzed in a similar fashion. Once the entire sample has been analyzed, a statistical analysis of the findings from this series of samples results can be performed and the results are then applied across the total population of records to determine the estimated number of errors, risks associated with the records, and materiality of such risks.
This approach is used because the number of notes receivable exceed the number for which manual evaluation in a cost efficient manner can be done. With the advancement of technology, the ability and capacity to perform recompilation processes in an efficient and cost effective manner have increased to encompass all the notes receivable, while the general premise of attribute and random sampling as it pertains to original documentation has continued.
In U.S. Pat. No. 6,311,166 entitled “Method for Analyzing Effectiveness of Internal Controls in a Model of an Accounting System,” dated Oct. 30, 2001 and issued to Robert A. Nado et al., a method for providing for assessment of control is disclosed. A method is provided for assessing control risks in a model based reasoning system used for analyzing financial accounting systems by decomposing and quantifying the risk factors in the model so that the risk factors can be used to determine areas in the accounting system for sufficient controls lacking and to determine which controls are key and thus, should be subject to detailed testing. Factors identified are failure impact risk, failure coverage risk, allowable risk, control detection risk, control strength, control defeat factor, attenuation factor, and control contribution. The present invention is used to enhance a hierarchical flow chart generating system, such as the Comet system, by providing risk analysis operative on a particular class of hierarchical structured flow charts. (Abstract) However, this method is another variation of a sampling analysis.
In U.S. Pat. No. 5,666,524 entitled “Parallel Processing Systems for Traversing a Transactional Database,” issued on Sep. 9, 1997 to Douglas F. Kunkel et al., a method of traversing a large database based upon user defined criteria computing information from the database based upon user defined criteria and providing information in the user specified format is disclosed. This invention discloses a parallel processing system provided which traverses logical records of events or transactional database contained in two or more physical files in accordance with one or more viewed definitions specified by the user. Each view definition includes a set of processing parameters and may reference one or more of the physical files. While one or more view definitions are transformed into entries of a logic table, the logic table including a plurality of sets, each set corresponding to a respective physical file and containing entries corresponding to the view definitions which reference its respective physical file. Each set of the logic table is transformed into machine code instructions from a separate thread of the parallel processing system. Each thread operates on its respective physical file and parallel with one or more of the other threads to traverse the physical file to retrieve information based on the view definition corresponding to the thread and stored the retrieved information and extract files designated by the view definition and performs design by the view definitions. (Abstract)
Neither of these patents address the need for a more complete monitoring and testing of the total population of transactions throughout a designated period. Therefore, any improvement in the ability to provide continuous assurance of the total population of transaction records of an entity without incurring excessive expense would be greatly beneficial.